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Chapter 8:Developing New Products and Managing the Product Life-CycleTutorial 5New-Product Development StrategyStrategies for obtaining a new product:-Acquisition: - buy the whole company - buy patent/licenses

New-product development efforts: - product improvements and modifications - development of new brands Examples of product failuresColgate Kitchen EntreesCrystal Clear PepsiThe McDonald Hula Burger

Possible reasons of products failure~ Overestimation of market size~ Design problems~ Incorrect pricing or positioning~ High Development costs~ Competitors reaction

8 Steps ofNew Product Development ProcessStep 1 :Idea GenerationStep 2 :Idea ScreeningStep 3 :Concept Development & TestingStep 4 :Marketing Strategy DevelopmentStep 5 :Business AnalysisStep 6 :Product DevelopmentStep 7 :Test MarketingStep 8 :Commercialization

Step 1 : Idea GenerationSystematic search for new-product ideas.

Two sources :Internal SourcesExternal Sources

Internal Sources-Formal Research-Development ProcessExternal Sources-Customers-Competitors-Distributors / Reseller-Suppliers-Outsourcing-CrowdsourcingStep 2 : Idea ScreeningSpot Good Ideas Drop Poor Ideas

Estimate market size, product price, development time and costs, manufacturing costs, and rate of return.

Step 3 : Concept Development & TestingProduct Idea

Product Concept

Product ImageProduct Idea-An idea that the company can see itself offering.

Product Concept-Detailed version of the idea.

Product Image-Consumers perceive an actual or potential product.Step 4 : Marketing Strategy DevelopmentDesigning an initial marketing strategy for a new-product.

Three PartsPart One-Describes the target market-Planned product positions

Part Two-Planned price, distribution, and marketing budget.

Part Three-Describes the long-run sales, profit goals and marketing mix strategy.

Step 5 : Business AnalysisReview of the sales, costs, and profit.

Estimate Cost-Marketing-Operation-Finance Cost

Estimate Sales-Sales HistoryStep 6 : Product DevelopmentDevelop concept into physical product.

Prototypes are made.-Develop & test one / more physical versions of the product concept.

Step 7 : Test MarketingProduct / marketing program introduced in more realistic market settings.

Give experience with marketing.Step 8 : CommercializationTiming

Where to introduce the product

Market rollout -Minimize the risk of a new-product failure. Organizing New-Product Development# Sequential Approach - complete each stage before moving to next phase

# Simultaneous Approach - overlapping steps to save time and increase effectiveness Product Life Cycle (PLC) StrategiesShows the course that a products sales and profits take over a lifetimeDiscribe how products and markets work & develop a good marketing strategies(a) Introduction StageLow sales Negative or zero profits

Marketing strategies Create product awareness and trial

(b) Growth StageRapidly rising salesRising profits

Marketing Strategies Maximize the product market share

(c) Maturity StageSales at peakHigh profits

Marketing Strategies Maximize profits and defend market share Ways to maintain high profit Modifying the market - increase the consumption of product Modifying the product- changing characteristics to attract new users

Modifying the marketing mix- increase sales by changing marketing mix elements

(d) Decline StageDeclining salesDeclining profits

Marketing Strategies Reduce expenditures and milk the brandTutorial Answer Acquisition

New product development effortsList TWO (2) ways a firm can obtain new products.1.

2. List TWO(2) approaches in new product development.Sequential Approach ( step by step )

Simultaneous Approach ( overlapping steps )

3. A typical product life cycle (PLC) undergoes FOUR distinct stages. List the stages and identify a companys, marketing objectives involved in each of these stages.1.Introduction Stage-Create product awareness and trial

2.Growth Stage-Maximize market share

3.Maturity Stage-Maximize profits while defending market share

4.Decline Stage-Reduce expenditures and milk the brand4. Within the malaysian context, identify stage of the product life cycle that hybrid automobiles are in?CharacteristicGrowth stage of PLCSales are growingRising of profitsNumber of competitors is growingProduct has been accepted by buyers

StrategiesOffer variety of productPenetration strategyPromotion advertise and promote

The maturity stage is characterized by slowing product growth. It is also a stage where the company enjoys profit maximization. In short, it is a stage where most marketers hope their product will remain for as long as possible. Explain briefly how product managers can achieve this aim.Modifying market, consumption of productModifying the product, mutable characteristicsModifying marketing mix, sales, elements 5.1. Listed here are three different products in various stages of the product life cycle. What marketing strategies would you suggest to these companies? Answers:(a)Canon digital cameras - growth stage(b) Panasonic high-definition television-introductory stage(c)Handheld manual can openers - decline stage.

Maximize profit-warranty, features, accessoriesCreate product awareness, sales promotionReduce expenditure, cut price, close product lineSection C